Sensex, Nifty: Why stock market is rising ahead of US Fed policy outcome

Benchmark Sensex and Nifty gained on Wednesday, ahead of the outcome of the two-day US Fed policy review later in the day. The recent rally in dollar and US bond yields has halted, even as analysts does not expect the Fed to cut interest rate further. This is sentimentally positive for India, which has seen a massive Rs 71,536 crore foreign outflows in January so far. Investors are also keeping expectations low from the Union Budget 2025.

The BSE Sensex gained 186.10 points or 0.25 per cent to 6,087.51. Nifty stood at 23,015.45, up 58.20 points or 0.25 per cent. The sentiment in the broader market improved with three stocks rising on fall in every single stock.

The recovery in the market can continue with resilience in fairly priced financials, said Vijayakumar, Chief Investment Strategist, Geojit Financial Services. "A sharp rally is unlikely since FIIs will sell at higher levels. The market will be looking forward to positive cues in the Budget. The Fed decision today is unlikely to influence the market since no change in policy is expected from this meeting," Vijayakumar said.

All eyes were on the listing of ITC Hotels, which is expected to list in the Rs 140-175 range. Following the listing of ITC Hotels, ITC shareholders are not expected to experience a material increase in value, as ITC's price will be adjusted to account for the holding company discount. But analysts are positive on ITC's prospects.

Suzlon Energy hit its 5 per cent circuit limit at Rs 52.76. Suzlon Energy Ltd is a 'Buy', Nuvama Institutional Equities said in a note, as it upgraded the stock from 'Hold' on valuation comfort, following the recent stock correction.

Nifty is down 3.3 per cent in January so far, while Nifty Midcap is down 9.1 per cent and Nifty Small cap 14.71 per cent during the same period.

"The takeaway from this important data is that valuations are reverting to mean. This trend will make the market healthy and is likely to continue. Correction in the overvalued broader market is desirable," Vijayakumar said.

On the recent stock market correction, Morgan Stanley said stock prices have been falling on falling trading volumes, implying an absence of a bid rather than a forceful selling. Private financials appear to be offer the best risk-reward ratio, it noted.

For now, Morgan Stanley's proprietary sentiment indicator has gone into buy territory for the first time since mid-2022.